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Emini breakout below bull trend line and testing 100-day MA

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Trading Update: Wednesday January 19, 2022

Emini pre-open market analysis

Emini daily chart

  • Emini breakout below bull trend line yesterday on daily and weekly charts.
  • It also closed below last week’s low, and it is testing 100-day MA.
  • Bears want reversal down from January 4 wedge top (September 2, November 22, January 4) to continue down to below December 3 low and October 4 low. Their probability will go up if today is a 2nd day closing below last week’s low.
  • Friday was a big bull day. Today opened near Friday’s open and sold off. All of Friday’s bulls are now trapped. That should lead to at least slightly lower prices.
  • Although the Emini has fallen below the January 10 low, it has not fallen below the more important December 3 low. If it does in January, there will be a 2nd consecutive OO top on the monthly chart. The bears would then have a 60% chance of a couple more months of lower prices. If the bulls are still in control, they will prevent that.
  • If January is a bear bar on the monthly chart, the more it closes near its low, the more likely the Emini will be sideways to down for another month or two.
  • They want January to be an outside down bar on the monthly chart. Since December was an outside up month, there would then be consecutive outside bars.
  • That is an OO Breakout Mode pattern. A break below its low would probably lead to a measured move down to the October low. It could reach the April 2021 gap on the monthly chart just below 4,000 within a couple months. That would be about a 20% correction.
  • Bulls want January to be a bull bar on the monthly chart. While there is still plenty of time remaining in January, the odds currently favor a bear bar.
  • Bulls hope the selloff is just a test of the low of last week, the bottom of the bull channel, the 100-day MA, and the 20-week EMA. They will need a strong bull day today or tomorrow to prevent a test of the December low.

Emini 5-minute chart and what to expect today

  • Emini is up 17 points in the overnight Globex session.
  • Since the Emini is oversold on the daily chart and in a 2-month trading range, there is an increased chance of a reversal up today from a failed breakout below the January 10 minor higher low.
  • Can the Emini form another big bear trend day today? Probably not, but if it does, that would increase the chance that the January 4 wedge top was the start of a 2- to 3-month correction.
  • Today therefore will more likely be sideways to up, and it might be a bull trend day. Traders should look for a possible bull trend from the open or a selloff and a reversal up.

Yesterday’s Emini setups

Emini trend resumption down and test of 100 day moving average. Breakout below bull trend line.

Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).

My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.

EURUSD Forex market trading strategies

EURUSD Forex daily chart

EURUSD Forex pausing after reversal down from top of bear channel
  • Yesterday was a Bear Surprise bar and the 3rd consecutive bear bar. The breakout above the bear trend line and the 2-month tight trading range might be failing.
  • The bears want a break below the December 15 low at the bottom of the 2-month trading range and then a measured move down to below the June 19, 2020 low.
  • They hope that yesterday is a resumption of the 2021 bear trend and that the selloff continues to below the bottom of the 7-year trading range. If they get a 2nd strong bear bar today, traders will expect a break below the 2-month trading range.
  • If today is a bull bar closing near its high, the bulls will hope that it is a higher low in a new Small Pullback Bull Trend.
  • If today is not a strong bull or bear bar, the EURUSD might begin to go sideways again in its 2-month trading range.
  • If there is a break below the 2-month tight trading range, that range will more likely be the Final Bear Flag instead of a bear flag in a move down to last year’s low. That means there probably will be a reversal back up within a few weeks.
  • The odds favor a rally for a couple months before a break below the 7-year low because the monthly chart is in a trading range and legs in a trading range do not typically go straight down from the top to the bottom.
  • Traders are deciding if the rally has begun or if there will be one more leg down before it begins.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

Emini Bear Trend From The Open and Broad Bear Channel

End of day summary

  • The Emini gapped up to just below the open of the week, but sold off in a Bear Trend From The open.
  • It reversed up from a wedge bottom and a High 2 bottom from just below yesterday’s low.
  • After a rally that tested the open, it sold off again to below yesterday’s low.
  • It collapsed in the final hour to just above the December 20 higher low. It formed an iii pattern at the end of the day. That is a Breakout Mode pattern on the 5-minute chart.
  • The bears hope that the Emini gaps down tomorrow below that December 20 low and forms a big bear trend day.
  • The bulls hope that the selloff will reverse up from a double bottom with that low.
  • Remember, as strong as the January selloff has been, the Emini is still in a 3-month trading range.
  • In a trading range, reversals are more common than successful breakouts. Consequently, the Emini will probably bounce, at least for a few days, from around the current level or the December 3 bottom of the range.
  • The momentum down on the daily chart is strong enough for traders to expect a break at least a little below the December 20 higher low.
  • An interesting possibility that January trades below the December 3 low, which is the December low. January would then be an outside down month after an outside up month in December.
  • That is an OO (consecutive outside bars) Breakout Mode pattern, but with January probably finishing with a bear body, a bear breakout would be more likely.
  • This would be the 2nd OO pattern in the past 5 months. If January is outside down and February goes below its low, that would trigger the OO sell signal and the micro wedge top sell signal on the monthly chart.
  • The Emini would then probably sell off for about a measured move down, based on the height of the OO (which is simply January’s range).
  • That should result in a test of the October 4 major higher low, the 20-month EMA, and the 200-day MA.
  • The selloff might reach the April 2021 gap above the March 2021 high on the monthly chart (and daily chart). That is just below 4000 and almost a 20% correction.
  • While I have been saying that the Emini would probably test the October low at some point in the 1st half of the year and maybe the 1st quarter, I have also said that I thought that a 20% correction to below that monthly gap is probably the worst case for 2022 and that the Emini probably would rally later in the year.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

Trading Room

Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.

Charts use Pacific Time

When I mention time, it is USA Pacific Time. The Emini day session charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.

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